Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 7592 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-03-2016
Appeal Filed By
Department
Bench Allotted
B
Assessment Year
2011-2012
Appeal Filed On
11-01-2016
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NOS.54,55,56 & 57 /MDS./2016 ( / ASSESSMENT YEARS :2009-10 TO 2012-13) ASSISTANT COMMISSIONER OF INCOME TAX, NON-CORPORATE CIRCLE -20(1), CHENNAI 600 034. VS. SHRI A.SANJAY A.WADHWA , OLD NO.80,NEW NO.42, NEW AVADI ROAD, KILPAUK, CHENNAI 600 010. PAN AAAPE 2072 L ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT ) / APPELLANT BY : MR.P.RADHAKRISHNAN,JCIT,D.R / RESPONDENT BY : MR.M.KARUNAKARAN,ADVOCATE / DATE OF HEARING : 14.03.2016 ! /DATE OF PRONOUNCEMENT : 24.03.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: ALL THESE FOUR APPEALS ARE FILED BY THE REVENUE A RE DIRECTED AGAINST THE COMMON ORDER OF THE LEARNED COMMISSIONE R OF INCOME TAX (A)-13, CHENNAI DATED 14.10.2015 PERTAINING T O THE ASSESSMENT YEARS 2009-10 TO 2012-13. ITA NOS.54 TO 57/MDS/2016 MR.A SANJAY A WADHWA 2 2.1 THE GRIEVANCE OF THE DEPARTMENT IS WITH REGARD TO THE TREATMENT OF COST OF VCD AND DVD OF VARIOUS FILMS RIGHTS ACQU IRED BY THE ASSESSEE AS REVENUE EXPENDITURE, THOUGH IT WAS TREA TED BY THE AO AS A CAPITAL EXPENDITURE. IN THIS CASE, THE AO TREATE D THE COST OF VCD AND DVD RIGHTS OF FILMS ACQUIRED BY THE ASSESSEE AS A CAPITAL EXPENDITURE BY PLACING RELIANCE ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M.SUBRAMANIAN REPORTED IN 272 ITR 525 (MAD.) ON THE REASON THAT IT GIVES ENDURING BENEFIT TO THE ASSESSEE. HOWEVER, LD.CIT(A) PLACED RELIANCE IN THE JUDGMENT S OF DELHI HIGH COURT IN THE CASE OF SUPER CASSETTES INDUSTRIES P LTD. VS. CIT REPORTED IN 41 ITD 513 AND CIT VS. KRISHNAN KUMAR IN ITA NO.50/2000 DATED 02.12.2014 WHEREIN HELD THAT:- IF THE ENDURING BENEFIT TEST IS FULFILLED, THE CO NCLUSION POSSIBLE COULD BE THAT THE PAYMENT WAS FOR ACQUIRING A CAPITAL ASSET AND EXPENDITURE RELATED TO IT IS CAPITAL EXPENDITURE. BUT THE ENDUR ING TEST COULD BREAK DOWN FOR GOOD VALID REASONS. FOR GOOD REASONS, THIS TEST NEED NOT BE APPLIED AS A TEST TO DETERMINE THE NATURE OF EXPENDITURE. T HE ADMITTED POSITION IS THAT THE ASSESSEES ARE IN THE BUSINESS RELATED TO M ANUFACTURE AND SALE OF MUSIC CASSETTES. LOOKING FROM A COMMERCIAL ANGLE, I T IS SEEN AND A COMMON KNOWLEDGE THAT MUSIC/FILM SONGS DO NOT HAVE A LONG LIFE. EACH YEAR, EXPENDITURE WAS INCURRED TO ACQUIRE AND PROCU RE SIMILAR RIGHTS IN NEW MUSIC. IT WAS A RECURRING EXPENDITURE QUITE SIM ILAR AND LIKE ACQUIRING AND PURCHASING RAW MATERIAL, USED IN EARNING PROFIT S. INCREASE IN RAW ITA NOS.54 TO 57/MDS/2016 MR.A SANJAY A WADHWA 3 MATERIAL WOULD INCREASE PRODUCTION, TURNOVER AND CO RRESPONDING PROFITS. IN CASE, SUCH RIGHTS WERE NOT ACQUIRED AND PURCHASE D FROM TIME TO TIME, THE ASSESSEE WOULD GO OUT OF THE BUSINESS. FURTHER AND IMPORTANTLY, SALE OF NEW MUSIC INITIALLY, WE ALL KNOW IS BRISK BUT FA DES AND CEASES TO BE CATCHY AFTER SOMETIME. WHEN POPULARITY FADES, THE S ALES FALTER AND RETURNS/INCOMES DOES NOT FLOW AND STOPS. THERE ARE A FEW SONGS WHICH ARE EVERGREEN AND ARE HEARD BY THE PUBLIC AT LARGE AND REMAIN POPULAR EVEN AFTER FEW/MANY YEARS OF THEIR RELEASE. SOME SO NGS OF THE 1960S AND 1970S/80S ARE CONSIDERED IMMORTAL AND TIMELESS. THE PERCENTAGE OF SUCH MUSIC AND SONGS IS ABYSMALLY SMALL AND PROBABLY IN THE RANGE OF 5% TO 10% OF THE MUSIC/SONGS LAUNCHED EVERY YEAR. THE SAI D PERCENTAGE WOULD NECESSARILY DEPEND UPON SEVERAL FACTORS, WHICH AGAI N WOULD BE FACT SPECIFIC LIKE THE MUSIC DIRECTOR, TYPE OF MUSIC, TH E SINGER ETC. 2.2 AGAINST THIS, THE ASSESSEE WAS IN APPEAL BEFOR E THE LD.CIT (A). ON APPEAL, THE LD.CIT (A) PLACED RELIANCE ON THE FO LLOWING DECISION OF THE TRIBUNAL:- I) M/S.FIVE STAR AUDIO VS. ACIT IN ITA NO.1921/MD S./2012 DATED 15.01.2013. II) STAR MUSIC VS. DCIT ITAT CHENNAI IN ITA NO.910/MDS./2011 DATED 30.03.2012. III) ACIT VS. M/S.SUN TV NETWORK LTD., CHENNAI IN ITA NO.1515-1520/MDS./2013 DATED 31.10.2013. ITA NOS.54 TO 57/MDS/2016 MR.A SANJAY A WADHWA 4 THE LD.CIT(A) FOLLOWING THE ABOVE JURISDICTIONAL TR IBUNAL DECISIONS, OBSERVED THAT THE COST OF THE VCD/DVD OF THE VARIOU S FILM RIGHTS ACQUIRED BY THE ASSESSEE HAS TO BE TREATED AS REVEN UE EXPENDITURE AND THE AO IS NOT CORRECT IN TREATING THE SAME AS C APITAL EXPENDITURE AND FURTHER ALLOWING DEPRECIATION ON THE SAME. AGA INST THIS, THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE ACQUIRED VCD/DVD OF VARIOUS FI LMS AND THE RIGHTS OVER THIS VCD/DVD ARE TO EXPLOIT THOSE FILMS BY MANUFACTURING VCD/DVD AND THERE IS NO RESTRICTION FOR USAGE OF TH ESE RIGHTS OR PRODUCTION OF THE AUDIO CASSETTES/ VCD/DVD AND THE ASSESSEE PRODUCE THESE CASSETTES/ VCD/DVD NOT ONLY IN ONE YE AR AND IT COULD BE PRODUCED FOR MORE THAN ONE YEARS. BEING SO, AS HELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M. SUBRAMANIAN REPORTED IN 272 ITR 525 (MAD.) THAT THE ENTIRE BENE FIT DERIVED BY THE ASSESSEE TO BE IN CAPITAL FIELD, NOT IN REVENUE FIE LD SO AS TO CLAIM IT AS BUSINESS EXPENDITURE. ON THE OTHER HAND, IT SHOULD BE CONSIDERED AS CAPITAL EXPENDITURE AND ENTITLED FOR DEPRECIATION A S PER INCOME TAX ITA NOS.54 TO 57/MDS/2016 MR.A SANJAY A WADHWA 5 RULES, 1962. BEING SO, WE ARE NOT IN AGREEMENT WI TH THE ORDER OF THE LD.CIT(A), WHO HAS GIVEN RELIEF TO THE ASSESSEE BY PLACING RELIANCE ON THE TRIBUNAL DECISIONS AND THE DECISION OF DELHI HIGH COURT WHICH IS NON-JURISDICTIONAL HIGH COURT, ACCORDINGLY, WE R EVERSE THE ORDER OF THE LD.CIT(A) AND ALLOW ALL THE FOUR APPEALS OF REV ENUE FOR ASSESSMENT YEARS 2009-10,2010-11,201-12 & 2012-13. 4. IN THE RESULT, ALL THE FOUR APPEALS OF THE REVEN UE ARE ALLOWED. ORDER PRONOUNCED ONTHURSDAY , THE 24 TH OF MARCH,2016 AT CHENNAI. SD/- SD/- ' # $ . % &' ( ( DUVVURU RL REDDY ) ) ( ( ) * + , ) ) ' CHANDRA POOJARI (- JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 24 TH MARCH,2016. K S SUNDARAM. ./-- 01-21 /COPY TO: - 1. /APPELLANT 2. /RESPONDENT 3. - 3-'( /CIT(A) 4. - 3 /CIT 5. 145- 6 /DR 6. 5'-7 /GF
